Will advisers ever match consumer demand?
While the Quality of Advice Review (QAR) is expected to have a positive impact on financial adviser numbers, it won’t be enough to keep up with consumer demand.
According to Rainmaker Information’s new Financial Adviser Report, the number of advisers could be finally bottoming out as the industry reaches a crossroads.
Both quarterly and rolling 12-month changes in adviser numbers are converging towards zero, with adviser numbers projected to remain around 15,000 to 18,000 by the end of the next decade.
Alex Dunnin, executive director of research and compliance at Rainmaker, said: “These projections affirm our view of the Quality of Advice Review’s anticipated positive impact on the industry.”
Last week, the government released the first consultation on its Delivering Better Financial Outcomes reforms.
The amendments, which follow the QAR, will provide clarification around adviser fee payments from members’ superannuation funds and remove red tape from financial advice.
“However, it is important to note that even at the upper end of this range, adviser numbers may barely keep pace with expected consumer demand,” Dunnin continued.
The significant 43 per cent decline in advisers since December 2018 alongside a projected 17 per cent rise in the number pre- and post-retirees over the next decade demonstrates the gap in supply and demand, the research house said.
Moreover, the number of Australian financial services licensees (AFSLs) has dropped at half the rate of adviser declines at 18 per cent.
This exposes a “concerning” disconnect between the number of practitioners in the profession compared to licensees, Dunnin explained.
“If these adviser numbers fall towards the lower end of the range, we risk facing a severe per capita shortage of advisers available to serve the needs of pre- and post-retirees,” he said.
“The industry faces a critical challenge to ensure that the growing demand for financial advice is met adequately.”
The executive director urged the advice industry to take a proactive approach in seeking innovative solutions to bridge the adviser shortage and make advice accessible to all Australians.
Rainmaker’s research parallels data from Adviser Ratings earlier this month, as the third quarter of 2023 demonstrated the second-lowest number of exits (251) and the highest number of new entrants (122) in five years.
In addition, industry professionals continue to emphasise the importance of attracting new entrants into the industry through graduate programs.